Two fourplexes on one property - Considered Commercial?

Question

Since I am a newbie, I need to ask a question about two vacant fourplexes on one property. I think I read on BP that a four plex could be financed under conventional financing but five or more units are considered apartments and financed under commercial financing. Is this correct?

I found two four plexes together on one property. Would this property be financed under conventional or commercial?

Lawrence T. · Answer

Jason,

you don't need Hard money if you were to moving forward on that property. Construction loan is the way to go. If you need more info e-mail me. Much to talk about and to understand. Good luck

Jason Andrews · Answer

Thanks Joel. That's what I was thinking.

I have a possible private money lender if needed. But how do you structure a contract with the private money lender and move to refi conventional loan? Still learning the different financing possibilities. Any other ideas?

Jason Andrews · Answer

@Yiv L. Thanks for your response. I originally thought they were on one property but when I went back to the county appraisal district records they were under two different addresses/property IDs.

The reason I was asking the question was for future reference. The property would have to be purchased under hard money/private money lending due to the rehabbing it needs. Just was researching how after the rehab how I would be able to do long term financing.

This property I am looking at would be my first real estate investment (possibly). It looks like a good oppurtunity but I might be biting off more than I can chew for a first investment.

Here a few problems that I having with doing the evaluation:

1. Small town - No other fourplexes in town for comps. Only a couple apartment complexes.

2. Needs considerable rehab. Soffits starting to rot. Old single pane windows. Not sure if there is Central A/C. Should I put it in if not available?

3. Property not for sale. How do I make an offer if no comps?

Plusses:

1. Very strong rental market in small town.

2. No other fourplexes in town. Might get for a great price making it a great oppurtunity for great passive income.

3. Historical area. A large number house being restored. Great location. Close to future revamped downtown area.

I am still in an evaulation phase and learning how to evaulate a property. I also have a partner and possibility of a great private investor to help. Just want to get all my numbers right on the evaulation.

Joel Owens · Answer

If they are on the same street sometimes a lender will do one loan for all of the buildings together.

The fact that they are vacant you are probably looking at  a local hard money lender and then refi out once stabilized in 6 months to 1 year or private money.

Yiv L. · Answer

@Jason Andrews if County record shows they are on a different parcel ID's, they are two individual 4-plex, then you can finance with conventional residential loan. If both buildings are on the same parcel ID, they are 5+ unit.

John Fossetti · Answer

It sounds to me like it will be classified as a 5+ property.  You will need to research the property more, if there are 2 unattached properties on one parcel of land it may still be considered 1 property or an 8 Unit complex.

Depending on Frontage and zoning the only way you could make it a Fourplex is by subdividing but I would simply take out a commercial loan and utilize the 8 units if you are looking to be a landlord.